As FinTechs scale, they bring banks more deposits, loans, transactions and fees while gaining more choice over which institutions provide the funding and infrastructure behind them.
Upgrade facilitated more than $53 billion in credit through a model built with banks and loan buyers when it applied this week to establish its own bank, PYMNTS reported Monday (Oct. 12).
The proposed Nevada industrial loan bank would give Upgrade additional ways to fund its credit products, but the company isn’t planning to replace the financial institutions already supporting its business. Upgrade said the bank would complement its existing relationships with bank partners and loan buyers, per the report.
Upgrade’s application comes as partnerships between FinTechs and financial institutions are expanding across lending, payments, deposits and technology. The economics can work in both directions. A FinTech can pay a bank for loan origination, payments access, account programs and other regulated services. Banks can receive deposits, transaction fees and lending assets generated through the FinTech’s distribution.
The amount of business available to divide grows with the FinTech.
A lender producing a few hundred million dollars of credit has less volume to spread among originating banks, warehouse lenders and loan buyers. At several billion dollars, the lender can support multiple funding sources and negotiate larger commitments. At scale, it’s possible to direct different products or portions of its loan production to different institutions rather than relying as heavily on a single relationship.
Funding has already moved in that direction. A PYMNTS examination of FinTech lender earnings found in May that lenders are using combinations of warehouse facilities, forward-flow agreements, securitizations, committed funding and deposits. Affirm, for example, has relationships with roughly 200 funding partners and about $13 billion of forward-flow capacity.
The Bank Side of the Equation
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Financial institutions have their own reasons to pursue the business.
A FinTech with a large customer base can supply deposits and payments activity as well as fees. A lender can deliver loans that banks want to buy or finance. Banks can decide whether they want the deposits, the fee business, the credit exposure or some combination of them.
PYMNTS Intelligence research on credit unions showed that reliance on outside providers is widening even as financial institutions grow.
The September report “FinTechs Want In: How Credit Unions Can Turn Partnerships Into Growth” found that credit unions use outside providers for an average of nine products, up from six in November 2024. Among credit unions with $1 billion to $5 billion in assets, 61% said partners help them innovate faster or at greater scale, up from 55% in November 2025. Fewer than 1% of credit union executives said they could innovate without external partners.
The research also found FinTech interest in the credit union market, which reaches nearly 146 million members. Products supplied through partnerships include payments, digital banking, lending and risk management.
A separate PYMNTS Intelligence report, “Credit Union Innovation Readiness: How Credit Unions and FinTechs Are Innovating Together” found in January that 56% of credit unions said partners helped them innovate faster or at greater scale, although 77% said their most recent partnership project took longer than planned.
Scale can make those delays and costs more expensive, but it can also support a broader network of relationships. Integrating another funding provider or bank requires technology, compliance work and operating resources. Once enough volume is available to send through the connection, the expense can be spread across more transactions or loans.
Upstart is testing another version of the model. The lending marketplace received conditional approval from the Office of the Comptroller of the Currency in July to establish Upstart Bank, PYMNTS reported July 27. Co-Founder and CEO Paul Gu described the application as an evolution of the company as it had grown in “size, scale and product offerings” and said the bank would streamline partnerships with banks, credit unions and institutional credit funds. Upstart also said the bank would complement its existing funding partnerships.
An owned bank gives a large lender another place to originate loans and another potential source of funding. Outside institutions can still provide warehouse capacity, purchase loans or participate through securitizations and committed capital arrangements. The FinTech does not have to finance every dollar of lending on its own balance sheet to gain some of the benefits of owning a bank.
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